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The ONE Group Reports Fourth Quarter and Full Year 2017 Results

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Company Provides Development Update and Issues Long-Term Growth
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Announces Appointment of New Director

NEW YORK--(BUSINESS WIRE)--
The ONE Group Hospitality, Inc. (“The ONE Group” or the “Company”)
(NASDAQ:STKS), today reported its financial results for the fourth
quarter and full year ended December 31, 2017. The Company also provided
a development update, issued long-term growth targets and announced the
appointment of a new director.

Highlights for the fourth quarter ended December 31, 2017 were as
follows:

Total GAAP revenue increased 6.1% to $21.7 million compared to $20.4
million in the same period last year;

Comparable sales for owned and managed STK units, inclusive of our
international units*, increased 9.5% compared to the same period last
year. Domestic comparable sales were +6% and international comparable
sales were +15.5%;

GAAP net income from continuing operations before income taxes was
$71,000 compared to a loss of $2.1 million for the same period last
year;

GAAP net loss attributable to The ONE Group Hospitality, Inc. was
$331,000 or $0.01 loss per share compared to GAAP net loss of $16.1
million or $0.64 loss per share for the same period last year;

Adjusted EBITDA** increased 58% to $2.4 million compared to the same
period last year and 54% to $7.0 million for the full year; and,

Total restaurant expenses decreased 540 basis points from 88% to 83%
as a percentage of revenues.

Emanuel “Manny” Hilario, Chief Executive Officer, said, “Fiscal 2017 was
an outstanding year for both sales and profitability at The ONE Group.
We stayed committed and made strong progress implementing and executing
our four-point strategy of driving comparable sales; focusing growth on
license and management deals; improving operational efficiency in the
restaurants; and reducing corporate G&A. The comparable sales and EBITDA
growth in our fourth quarter further demonstrates the successful
execution of this strategy and we are confident this success will
continue. We are particularly proud of the 540 basis point increase to
consolidated restaurant level margin compared to last year as well as
the over 50% increase in our fourth quarter and annual profits at the
EBITDA level.”

Mr. Hilario continued, “Looking ahead, 2018 is shaping up to be even
more exciting than last year. Interest in our brand is growing stronger
as evidenced by the development pipeline for our high margin,
asset-light business and we continue to see interest in our brand on a
world-wide basis. Strong execution at the restaurant level coupled with
our highly differentiated experience provides us with great confidence
that 2018 will be a highly productive year for our business.”

Mr. Hilario concluded, “We are pleased to be providing greater
transparency to our investors by articulating long-term growth targets.
Growing our top-line will be based upon an asset-light model of adding
three to five licensed units and one to two food and beverage
hospitality deals annually, coupled with comparable sales growth in the
low single digits (1% to 2%). We also intend to maintain strong
restaurant-level EBITDA margins, benefitting from economies of scale and
operating efficiencies, while remaining disciplined in our G&A
management. If these targets can be achieved, we should be able to
generate consistent growth in Adjusted EBITDA of 20%+ over the
long-term.”

*Comparable sales or same store sales (“SSS”), represents total food
and beverage sales at owned and managed units opened for a full 18-month
period. This metric includes total revenue from our US owned and managed
STK locations as well as the revenue reported to us with respect to
comparable sales at our international locations (measured in constant
currency), and excludes revenues where we do not directly control the
event sales force (Royalton Hotel in NY and The W Hotel in Westwood, CA).

Total food and beverage sales at owned and managed units, a non-GAAP
measure, represents our total revenue from our owned operations as well
as the revenue reported to us with respect to sales at our managed
locations, where we earn management and incentive fees at these
locations. For a reconciliation of our GAAP revenue to total food and
beverage sales at our owned and managed units and a discussion of why we
consider it useful, see the financial information accompanying this
release.

**Adjusted EBITDA, a non-GAAP measure, represents net loss
before interest expense, provision for income taxes, depreciation and
amortization, non-cash impairment loss, deferred rent, pre-opening
expenses, non-recurring gains and losses, stock based compensation,
losses from discontinued operations and certain transactional costs. For
a reconciliation of adjusted EBITDA to the most directly comparable
financial measure presented in accordance with GAAP and a discussion of
why we consider it useful, see the financial information accompanying
this release.

Fourth Quarter 2017 Financial Results

Total GAAP Revenue increased 6.1% to $21.7 million in the fourth quarter
of 2017 compared to $20.4 million in the same period last year due to
sales increases in comparable and new stores along with increased
revenue from management, license and incentive fee revenue.

Total owned net revenues increased 2.0% to $18.3 million in the fourth
quarter of 2017 compared to $18.0 million in the fourth quarter of 2016.
The increase was primarily due the opening of the STK in Denver in
January 2017 and an increase in comparable sales, partially offset by
the closing of the STK in Washington, DC in December 2016.

Management, license and incentive fee revenue increased 36.5% to $3.3
million in the fourth quarter of 2017 compared to $2.4 million in the
fourth quarter of 2016. The increase was driven by higher management and
incentive fees reflecting the strong performances of our European
locations along with the launch of the licensed STK in Dubai in December.

GAAP net loss attributable to The ONE Group Hospitality, Inc. in the
fourth quarter of 2017 the quarter was $331,000 or $0.01 loss per share
compared to GAAP net loss of $16.1 million or $0.64 loss per share in
the fourth quarter of 2016.

Adjusted EBITDA** increased 57.7% to $2.4 million in the fourth quarter
of 2017 from $1.5 million in the fourth quarter of 2016.

Total food and beverage sales at owned and managed units* increased 1.4%
to $44.3 million in the fourth quarter of 2017 compared to $43.7 million
in the fourth quarter of 2016.

Full Year 2017 Financial Results

Total GAAP Revenue increased 10.2% to $79.8 million for the full year
2017 compared to $72.4 million in 2016 due to sales increases in
comparable and new stores along with increased revenue from management,
license and incentive fee revenue.

Total owned net revenues increased 7.7% to $68.9 million in the full
year 2017 compared to $63.9 million in the full year 2016. The increase
was primarily due to the opening of our STK in Denver and the increase
in comparable sales across the brand restaurants.

Comparable sales from owned STK units increased 0.5% while comparable
sales from owned and managed STK units increased 2.6% reflecting the
success throughout the year of focused sales initiatives.

Management, license and incentive fee revenue increased 29.0% to $10.9
million in the full year 2017 compared to $8.5 million in the prior full
year. The revenues increase was primarily driven by our UK operations.

GAAP net loss attributable to The ONE Group Hospitality, Inc. in the
full year 2017 was $4.2 million or $0.16 loss per share compared to GAAP
net loss of $16.7 million or $0.66 loss per share in the full year 2016.

Adjusted EBITDA increased 53.6% to $7.0 million in the full year 2017
from $4.5 million in the full year 2016.

Total food and beverage sales at owned and managed units* increased 8.0%
to $169.8 million in the full year 2017 compared to $157.2 million in
the full year 2016

Three to five licensed restaurant units and one to two food and
beverage hospitality deals annually;

Comparable sales growth of 1% to 2%;

Consistent Adjusted EBITDA growth of at least 20%; and,

Continued focus on our asset light model and disciplined G&A
management, while benefitting from economies of scale and operating
efficiencies.

Appointment of New Director

The Company named Dimitrios J. Angelis as an independent member to its
Board of Directors effective March 28, 2018. Inclusive of his
appointment, the Company’s Board now consists of six directors.

Dimitrios J. Angelis brings over 15 years of legal and corporate
governance experience to The ONE Group. Mr. Angelis is currently
Principal at Life Sciences Legal, serving as outside general counsel on
all legal matters to several biotech, pharmaceutical, and medical device
companies. Before joining Life Sciences Legal, Mr. Angelis was Chairman
of the Board of Directors and CEO of OTI America, Inc. (NASDAQ: OTIV).
Prior to his business leadership role at On Track Innovations, he was
General Counsel and Corporate Secretary at Wockhardt, Inc., Senior
Counsel at Dr. Reddy’s Laboratories, Inc. and Chief Legal Officer at
Osteotech, Inc. Mr. Angelis was formerly a director at Actavis Inc. He
began his career at Mayer, Brown, LLP as a Corporate Associate.

Mr. Angelis currently serves as a director of Digirad Corporation
(NASDAQ: DRAD) and AmeriHoldings (NASDAQ: AMRH). He holds a Bachelor of
Arts degree from Boston College, a Master of Arts from California State
University, and a Juris Doctorate from New York University School of Law.

Mr. Hilario, Chief Executive Officer, said, “We are pleased to welcome
Dimitrios to our Board of Directors as an independent member. Dimitrios
is a strategic thinker with an extensive legal background and board
experience and will be a valuable asset to our entire organization.”

“I am honored to join the Board of Directors of The ONE Group, which has
established itself as leader in the high-end restaurant and hospitality
segment,” added Dimitrios Angelis. “I look forward to working with the
other directors to create long-term shareholder value.”

The conference call can be accessed live over the phone by dialing
877-407-3982 or for international callers by dialing 201-493-6780. A
replay will be available after the call and can be accessed by dialing
844-512-2921 or for international callers by dialing 201-493-6780; the
passcode is 13675576. The replay will be available until April 11, 2018.

About The ONE Group

The ONE Group (NASDAQ:STKS) is a global hospitality company that
develops and operates upscale, high-energy restaurants and lounges and
provides hospitality management services for hotels, casinos and other
high-end venues both nationally and internationally. The ONE Group’s
primary restaurant brand is STK, a modern twist on the American
steakhouse concept with locations in major metropolitan cities
throughout the U.S. and Europe. ONE Hospitality, The ONE Group’s food
and beverage hospitality services business, provides the development,
management and operations for premier restaurants and turn-key food and
beverage services within high-end hotels and casinos. Additional
information about The ONE Group can be found at www.togrp.com.

Cautionary Statement on Forward-Looking Statements

This press release includes “forward-looking statements” within the
meaning of the “safe harbor” provisions of the United States Private
Securities Litigation Reform Act of 1995. For example, the statements
related to the exploration of strategic alternatives and the potential
results therefrom and the statements related to our strategic review of
our operations targeting sources for 2018 and beyond are
forward-looking. Forward-looking statements may be identified by the use
of words such as “anticipate”, “believe”, “expect”, “estimate”, “plan”,
“outlook”, and “project” and other similar expressions that predict or
indicate future events or trends or that are not statements of
historical matters. A number of factors could cause actual results or
outcomes to differ materially from those indicated by such
forward-looking statements, including but not limited to, (1) our
ability to open new restaurants and food and beverage locations in
current and additional markets, grow and manage growth profitably,
maintain relationships with suppliers and obtain adequate supply of
products and retain our key employees; (2) factors beyond our control
that affect the number and timing of new restaurant openings, including
weather conditions and factors under the control of landlords,
contractors and regulatory and/or licensing authorities; (3)in
the case of our strategic review of operations, our ability to
successfully improve performance and cost, realize the benefits of our
marketing efforts, and achieve improved results as we focus on
developing new management and license deals; (4) changes in applicable
laws or regulations; (5) the possibility that the Company may be
adversely affected by other economic, business, and/or competitive
factors; and (6) other risks and uncertainties indicated from time to
time in our filings with the SEC, including our Annual Report on Form
10-K filed for the year ended December 31, 2017.

Investors are referred to the most recent reports filed with the SEC
by The ONE Group Hospitality, Inc. Investors are cautioned not to place
undue reliance upon any forward-looking statements, which speak only as
of the date made, and we undertake no obligation to update or revise the
forward-looking statements, whether as a result of new information,
future events, or otherwise.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited, in thousands, except share and per share data)

The following table sets forth certain statements of operations
and comprehensive income data for the periods indicated:

For the quarter ended December 31,

2017

2016

Revenues:

Owned restaurant net revenues

$

16,554

$

15,647

Owned food, beverage and other revenues

1,767

2,320

Total owned revenue

18,321

17,967

Management, license and incentive fee revenue

3,340

2,447

Total revenues

21,661

20,414

Cost and expenses:

Owned operating expenses:

Restaurants:

Owned restaurant cost of sales

4,394

4,019

Owned restaurant operating expenses

9,348

9,820

Total restaurant expenses

13,742

13,839

Owned food, beverage and other expenses

2,100

2,198

Total owned operating expenses

15,842

16,037

General and administrative (including stock-based compensation of
$330 and $115, respectively)

3,101

2,993

Settlements

—

—

Depreciation and amortization

430

819

Lease termination expense and related asset write-offs

898

529

Pre-opening expenses

377

1,513

Transaction costs

167

788

Equity in loss (income) of investee companies

79

(182

)

Other expense (income), net

333

(173

)

Total costs and expenses

21,227

22,324

Operating income (loss)

434

(1,910

)

Other expenses, net:

Derivative income

—

—

Interest expense, net of interest income

363

187

Total other expenses, net

363

187

Income (loss) from continuing operations before provision for
income taxes

71

(2,097

)

Provision for income taxes

285

13,937

Loss from continuing operations

(214

)

(16,034

)

Loss from discontinued operations, net of taxes

—

93

Net loss

(214

)

(16,127

)

Less: net income attributable to noncontrolling interest

117

21

Net loss attributable to The ONE Group Hospitality, Inc.

$

(331

)

$

(16,148

)

Currency translation adjustment

(228

)

(973

)

Comprehensive loss

$

(559

)

$

(17,121

)

Basic and diluted loss per share:

Continuing operations

$

(0.01

)

$

(0.64

)

Discontinued operations

$

—

$

—

Attributable to The ONE Group Hospitality, Inc.

$

(0.01

)

$

(0.64

)

Shares used in computing basic and diluted loss per share

26,182,210

25,050,628

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited, in thousands, except share and per share data)

The following table sets forth certain statements of operations
and comprehensive income data for the periods indicated:

For the years ended December 31,

2017

2016

Revenues:

Owned restaurant net revenues

$

58,654

$

54,068

Owned food, beverage and other revenues

10,227

9,880

Total owned revenue

68,881

63,948

Management, license and incentive fee revenue

10,917

8,466

Total revenues

79,798

72,414

Cost and expenses:

Owned operating expenses:

Restaurants:

Owned restaurant cost of sales

15,544

13,781

Owned restaurant operating expenses

37,036

34,542

Total restaurant expenses

52,580

48,323

Owned food, beverage and other expenses

9,396

8,805

Total owned operating expenses

61,976

57,128

General and administrative (including stock-based compensation of
$1,074 and $838, respectively)

We prepare our financial statements in accordance with generally
accepted accounting principles (GAAP). In this press release, we also
make references to the following non-GAAP financial measures: total food
and beverage sales at owned and managed units and adjusted EBITDA.

Total food and beverage sales at owned and managed units. Total
food and beverage sales at owned and managed units represents our total
revenue from our owned operations as well as the revenue reported to us
with respect to sales at our managed locations, where we earn management
and incentive fees at these locations. We believe that this measure
represents a useful internal measure of performance as it identifies
total sales associated with our brands and hospitality services that we
provide. We believe that this measure also represents a useful internal
measure of performance. Accordingly, we include this non-GAAP measure so
that investors can review financial data that management uses in
evaluating performance, and we believe that it will assist the
investment community in assessing performance of restaurants and other
services we operate, whether or not the operation is owned by us.
However, because this measure is not determined in accordance with GAAP,
it is susceptible to varying calculations and not all companies
calculate these measures in the same manner. As a result, this measure
as presented may not be directly comparable to a similarly titled
measure presented by other companies. This non-GAAP measure is presented
as supplemental information and not as an alternative to any GAAP
measurements. The following table includes a reconciliation of our GAAP
revenue to total food and beverage sales at our owned and managed units
(in thousands):

For the quarter ended

For the year ended

December 31,2017

December 31,2016

December 31,2017

December 31,2016

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Owned restaurant net revenue (a)

$16,554

$15,647

$58,654

$54,068

Owned food, beverage and other revenues (a)

1,767

2,320

10,227

9,880

Total owned revenue

18,321

17,967

68,881

63,948

Management, license and incentive revenue

3,340

2,447

10,917

8,466

GAAP Revenues

$21,661

$20,414

79,798

72,414

Food and Beverage Sales from Managed Units (a)

$25,979

$25,733

$100,963

$93,255

Total Food and Beverage sales at Owned and Managed Units

$44,300

$43,700

$169,844

$157,203

(a)

Components of Total Food & Beverage Sales at Owned and Managed Units

The following table presents the elements of the Comparable sales
measure for Fiscal 2017 on a quarterly basis. Note that comparable sales
for international managed business is determined on a constant currency
basis.

Q1

Q2

Q3

Q4

Year

US Owned Restaurants

-1.8%

1.2%

-0.9%

5.8%

0.5%

US Managed Locations

8.3%

2.5%

6.5%

6.6%

6.0%

US Total

2.6%

1.7%

1.9%

6.0%

2.6%

International

13.2%

2.6%

9.4%

15.5%

10.0%

Global

6.0%

2.0%

4.6%

9.5%

5.2%

Adjusted EBITDA. We define adjusted EBITDA as net loss before
interest expense, provision for income taxes, depreciation and
amortization, non-cash impairment loss, deferred rent, pre-opening
expenses, non-recurring gains and losses, stock based compensation,
losses from discontinued operations and certain transactional costs.
Adjusted EBITDA has been presented in this press release and is a
supplemental measure of financial performance that is not required by,
or presented in accordance with, GAAP.

We believe that adjusted EBITDA is an appropriate measure of operating
performance, as it provides a clear picture of our operating results by
eliminating certain non-cash expenses that are not reflective of the
underlying business performance. We use this metric to facilitate a
comparison of our operating performance on a consistent basis from
period to period and to analyze the factors and trends affecting our
business as well as evaluate the performance of our units. Adjusted
EBITDA has limitations as an analytical tool and our calculation thereof
may not be comparable to that reported by other companies; accordingly,
you should not consider it in isolation or as a substitute for analysis
of our results as reported under GAAP. Adjusted EBITDA is included in
this press release because it is a key metric used by management.
Additionally, adjusted EBITDA is frequently used by analysts, investors
and other interested parties to evaluate companies in our industry. We
use adjusted EBITDA, alongside other GAAP measures such as net income
(loss), to measure profitability, as a key profitability target in our
annual and other budgets, and to compare our performance against that of
peer companies. We believe that adjusted EBITDA provides useful
information facilitating operating performance comparisons from period
to period.

The following table presents a reconciliation of net income to adjusted
EBITDA for the periods indicated (unaudited, in thousands):

For the quarters ended December 31,

2017

2016

Net loss attributable to The ONE Group Hospitality, Inc.

$

(331

)

$

(16,148

)

Net income attributable to noncontrolling interest

117

21

Net loss

(214

)

(16,127

)

Interest expense, net of interest income

363

187

Provision for income taxes

285

13,937

Depreciation and amortization

430

819

EBITDA

864

(1,184

)

Deferred rent (1)

(21

)

(250

)

Pre-opening expenses

377

1,513

Lease termination and related asset write-offs (2)

898

529

Loss from discontinued operations

—

93

Transaction costs (3)

167

788

Stock based compensation

330

115

Adjusted EBITDA

2,615

1,604

Adjusted EBITDA attributable to noncontrolling interest

187

64

Adjusted EBITDA attributable to The ONE Group Hospitality, Inc.

$

2,428

$

1,540

For the years ended December 31,

2017

2016

Net loss attributable to The ONE Group Hospitality, Inc.

$

(4,199

)

$

(16,688

)

Net income attributable to noncontrolling interest

188

233

Net loss

(4,011

)

(16,455

)

Interest expense, net of interest income

1,167

464

Provision for income taxes

650

10,370

Depreciation and amortization

3,051

2,647

EBITDA

857

(2,974

)

Deferred rent (1)

(61

)

(657

)

Pre-opening expenses

1,663

5,994

Lease termination and related asset write-offs (2)

1,781

529

Loss from discontinued operations

106

92

Transaction costs (3)

421

1,293

Derivative income

—

(100

)

Stock based compensation

1,074

838

Settlements

1,295

—

Equity share of settlement costs

270

—

Adjusted EBITDA

7,406

5,015

Adjusted EBITDA attributable to noncontrolling interest

456

491

Adjusted EBITDA attributable to The ONE Group Hospitality, Inc.

$

6,950

$

4,524

(1) Deferred rent is included in owned restaurant operating expenses
and general and administrative expense on the statement of
operations and comprehensive income.

(2) Lease termination and related asset write-offs is related to the
costs associated with closed or abandoned locations.

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